Finance Board Fracas Has Letters Flying

By Garver, Rob | American Banker, October 11, 2002 | Go to article overview

Finance Board Fracas Has Letters Flying


Garver, Rob, American Banker


Two prominent Democrats are demanding investigations into a political fund-raiser involving Federal Housing Finance Board Chairman John T. Korsmo.

Mr. Korsmo has been in lawmakers' sights since Oct. 1, when he appeared as a "special guest" at a $500-a-head reception in support of Rick Clayburgh, a Republican candidate for Congress in North Dakota.

Senate Banking Committee Chairman Paul Sarbanes and others have been especially critical because invitations highlighting Mr. Korsmo's expected appearance were sent to the presidents of several Federal Home Loan banks, which he regulates.

Meanwhile, the prospects for a nominee to the Finance Board appeared to darken Thursday. Diana Furchtgott-Roth, who faced a contentious nomination hearing last week, sent a second letter to top Democrats on the Senate Banking Committee, who had asked her in light of the Korsmo controversy to clarify her stand on regulators' participation in fund-raising.

Ms. Furchtgott-Roth's Oct. 8 letter consisted of just one sentence, that she "will not do any fund-raising activities for any entity that is regulated by the Federal Housing Finance Board."

Senate sources said they were puzzled by the response, because she had not been asked about raising money for the Federal Home Loan banks but about fund-raisers for political candidates.

Critics' sentiments about Mr. Korsmo were clearer, however.

In letters dated Oct. 9 and released Thursday, Sen. Sarbanes, D-Md., asked the General Accounting Office and the Finance Board's inspector general to conduct detailed investigations of Mr. Korsmo's fund-raising activities.

In a third letter, sent directly to Mr. Korsmo, Sen. Sarbanes criticized him for failing to meet requirements for ethical behavior that the Finance Board chairman himself had codified in a set of "Standards of Conduct" only a few weeks before.

"In my view, your conduct ... raises serious questions as to whether you have lived up to the standard you set for yourself, your fellow board members, and the staff of the FHFB," wrote Sen. Sarbanes, citing a front-page story in American Banker on Oct. 1.

Mr. Korsmo was expected to send a written response late Thursday. "The chairman's letter will address all of the questions raised in Senator Sarbanes' letter," a spokesman for Mr. Korsmo said.

California Rep. Henry A. Waxman, the top Democrat on the House Committee on Government Reform, has called for his panel to launch a probe as well.

In a letter to Committee Chairman Dan Burton, R-Ind., Rep. Waxman noted that in 1997 several congressional committees targeted then-Comptroller of the Currency Eugene Ludwig in a series of similar investigations. …

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